Markets
ATR

Owens-Illinois Q4 Earnings In Line, 2016 Guidance Upbeat

Owens-Illinois, Inc .'s OI fourth-quarter 2015 adjusted earnings per share of 40 cents per share came in line with the Zacks Consensus Estimate and increased 25% year over year on a constant currency basis. Including one-time items, the company reported a loss per share of $1.25 in the quarter compared with a loss per share of $1.20 in the year-ago quarter. Shares of Owens-Illinois went up 4.47% in after-hours trading following the earnings results.

Owens-Illinois Inc. (OI) Street EPS & Surprise Percent - Last 5 Quarters | FindTheCompany

Operational Update

Owens-Illinois' net sales increased 1% year over year to $1,626 million, surpassing the Zacks Consensus Estimate of $1,602 million. Currency headwinds had a negative impact of approximately $200 million or 13% on sales. Higher prices in Latin America were largely offset by lower prices in other regions, resulting in flat global pricing. The newly acquired food and beverage business contributed $197 million to sales.

The company reported a 14% rise in sales volume during the quarter. Excluding the acquired business, global shipments rose 2% year over year. Shipments in Asia Pacific increased 7% driven by improving wine exports from Australia. However, Europe sales volume were on par with the prior-year quarter as lower beer shipments were offset by higher shipments in all other categories.

Cost of sales declined 2% to $1.34 billion in the quarter. Gross profit increased 22% to $289 million from $237 million in the prior-year quarter. Selling and administrative expenses decreased 11% to $125 million.

Segment operating profit increased 3% year over year to $186 million. The acquired business contributed $32 million to segment operating profit. Excluding the acquired business, improved segment operating profit in North America and Asia Pacific was mostly offset by lower operating profit in Europe and the Latin American legacy business.

Segment operating profit in North America almost doubled year over year, driven by higher production volumes and much more integrated end-to-end supply chain management. In Asia Pacific, segment operating profit, excluding the impact of foreign currency, increased 28% year over year mainly due to higher sales and production volume, as well as the benefit of insurance proceeds related to storm damage in Australia that occurred in 2014.

Latin America's segment operating profit increased $3 million, or $23 million on a constant currency basis, from the prior-year quarter. Contribution from the acquired business helped offset the unfavorable currency translation effect. In Europe, the company witnessed a $25 million decline in segment operating profit, with more than 35% of the decrease attributed to the devaluation of the euro. Pricing was down 1% while operating costs increased in Europe in the quarter, primarily due to lower productivity.

Full Year Performance

Owens-Illinois reported earnings per share of $2.00 in 2015, down from $2.07 in the prior year, on a constant currency basis. Earnings were in line with the Zacks Consensus Estimate as well as the guidance. Including one-time items, the company reported a loss per share of 44 cents in the quarter as against a profit per share of 59 cents in the year-ago quarter.

Revenues declined 9% year over year to $6.156 billion, ahead of the Zacks Consensus Estimate of $6.117 billion. Global volumes rose 3% from the prior year.

Financial Update

Owens-Illinois had cash and cash equivalents of $399 million at the end of 2015, down from $512 million at 2014 end. The company reported cash flow from operations of $612 million in 2015 compared with $698 million in the prior year. The company's long-term debt increased to $5.35 billion as of Dec 31, 2015, from $2.96 billion as of Dec 31, 2014. The company's leverage ratio was 4.0x at 2015 end, an improvement from 4.2x at the end of the third quarter of 2015.

Owens-Illinois generated free cash flow of $210 million in 2015, modestly exceeding management's guidance. This was on par with the prior year in constant currency, which was the company's second highest year on record.

Owens-Illinois repurchased $100 million of shares during the first half of 2015. For the next several years, the company plans to prudently invest in the business and focus on debt repayment to improve its net debt to EBITDA leverage ratio.

Guidance

For 2016, Owens-Illinois expects adjusted earnings to be in the range of $2.10 to $2.25. For the year, the company expects to deliver increased earnings and cash flow mainly driven by higher segment operating profit. Free cash flow generation in 2016 is expected to be approximately $280 million and its priority for free cash flow continues to be debt reduction.

Owens-Illinois expects trends in the majority of its end markets to remain stable in 2016. The company will benefit from its growing exposure to U.S. beer imports and the Mexican domestic market. While continued external uncertainties, such as economic conditions in Brazil and price dynamics in Europe, remain as concerns, the company remains focused on maximizing the value of the acquired business, improving its end-to-end supply chain performance, and reducing costs through increasing organizational effectiveness and spending discipline. This will enable the company to deliver earnings growth in 2016.

Peer Performance

Bemis Company, Inc.'s BMS fourth quarter adjusted earnings rose 5% year over year to 60 cents per share, beating the Zacks Consensus Estimate by a penny.

Ball Corporation BLL reported fourth quarter 2015 adjusted earnings of 80 cents per share. Earnings effortlessly beat the Zacks Consensus Estimate of 75 cents but declined 4.8% on a year-over-year basis.

AptarGroup, Inc. ATR reported record fourth-quarter 2015 earnings per share of 67 cents, which improved 18% year over year from 57 cents per share. Earnings surpassed the company's guidance range of 61 cents to 66 cents and also came in ahead of the Zacks Consensus Estimate of 64 cents.

Owens-Illinois currently carries a Zacks Rank #4 (Sell).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

BALL CORP (BLL): Free Stock Analysis Report

BEMIS (BMS): Free Stock Analysis Report

APTARGROUP INC (ATR): Free Stock Analysis Report

OWENS-ILLINOIS (OI): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

ATR BLL OI

Other Topics

Earnings Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More